Every transaction is built on trust. If you’re buying a hamburger, you trust that it will be cooked enough so that you don’t get E. coli. If you’re buying gold, you trust that it is real gold and not fake gold.
The sale of a business is no different, yet many owners are unaware of how monumental trust is in the transaction. I have seen it single-handedly destroy otherwise flawless deals. What trust needs to be established and maintained in order for a broker to complete a business sale?
SELLER TRUST IN THE BUYER
Since I called out business owners for not realizing the importance of trust, let’s start with their needs.
Selling a business is an emotional transaction. The seller needs to have reassurance that the buyer is going to lead the business forward. They are essentially handing off the baton, with faith that the buyer will carry it through the race to a positive outcome.
Message to buyers: The owner of the business you’re seeking to buy does not want you to turn around and sell it again. They don’t want you to implode it. They don’t want you to fire their employees. They definitely don’t want you to lose their customers. While there is an exchange of money for the business, your roadmap for the business that you are buying is still very important to the seller.
If you and the seller agree that you will keep the company where it’s located, and then it’s uncovered in due diligence that you’re looking at another office space, guess what? The trust is broken. If you make a verbal pact that you will not make any drastic changes to the business, and then the seller sees that your finance package lists an exit in three years, the trust is gone—forever.
The buyer in a business sale needs to show honesty and integrity toward the seller in order to earn the same in return. It’s a very delicate dance, because during all of this, the buyer will usually need to refrain from speaking with the seller’s employees or letting information pertaining to the sale “leak” in the workplace. This is another area where even the slightest, most unintentional miscommunication can put an irreparable dent in trust with the seller.
BUYER TRUST IN THE SELLER
Now, sellers, I need you to read this part, too.
If someone is considering buying your business, it’s an unwritten rule that you must provide them with everything they need to know in order to make their decision—no secrets, no loopholes. This means not only answering their questions truthfully and wholly, but also giving information voluntarily that might not otherwise surface in the discovery phase.
Don’t let a landlord issue skate under the radar because the buyer didn’t ask about landlord issues. Don’t “forget” about a maintenance problem because the buyer didn’t request a maintenance list. And certainly, don’t ever, ever hide any financials. Not only will the buyer eventually find out, they will also likely bail altogether because they have no way of knowing whether there will be unpleasant surprises after the sale. No one is going to buy a business without 100 percent confidence that they know exactly what they’re buying.
Please, for the sake of the sale and all the goals you wish to achieve from it, just be honest about your business.
SELLER TRUST IN SERVICE PROVIDERS
There is a wild card to all of this, and it’s trust between the seller and their service providers. As your broker, I need you to know and truly believe that I am working in your best interests at all times. The same goes for your attorney, CPA, and whomever else you might rely on for professional services involving your business. You need to trust us with the entire, transparent truth, giving us the information we need in order to do our jobs and position you for a successful sale. Do yourself a favor from the outset and only work with service providers you trust with all of your information, anything less makes both our jobs impossible.
At Exit Consulting Group, we’re as honest as honest can be. We tell it like it is and will always give you a straight answer. Have questions about what we do and how we became one of the only firms specializing in exit strategies? Learn more about our services and our story.